Investors love a good transfer [1]. Anything to shave a couple of basis points from platform fees.
Regulators love a good transfer. It’s a sure sign of a healthy competitive market.
Platforms love a good transfer. At least they do when they’re on the receiving end – admittedly not so much when they’re losing assets to a competitor.
So if everyone loves a good transfer, why do so many go wrong? Why do some complete in an hour while others drag on for a year? And crucially — how can you tilt the odds in favour of a smooth ride?
Maybe get yourself a coffee. We’ll need to wade through some detail before we get to the answers.
(We’re focusing mainly on retail platform transfers, though much of this applies to adviser platforms, wealth managers and defined contribution pension providers. We’re steering clear of the defined benefit pension minefield.)
Know your rights
There are two types of platform transfers:
- Cash transfers – holdings are sold, and the resulting cash is moved.
- In-specie transfers – investments are transferred as-is.
Cash transfers are simpler but have an obvious disadvantage: you’re out of the market [2] for the duration, with all the associated market timing risks, tax implications, and trading costs.
In the bad old days (before RDR [3] came into effect at the end of 2012), many platforms were a metaphorical ‘lobster pot’: easy to start investing but hard to escape later. They refused in-specie transfers or made them prohibitively expensive, which meant it was effectively impossible to transfer out without selling.
Today, platforms have to offer in-specie transfers. And even though exit fees aren’t officially banned, they have almost disappeared, so there’s no reason to hold back.
Of course, your investments must be supported on the new platform for it to be transferable. That insured fund you’ve had since 1990? You’re going to need to sell that.
Also – it’s not necessarily all or nothing. Many platforms will allow partial transfers, so you can move some investments while leaving others behind.
How do transfers work?
Transfers are typically driven by the receiving platform. You ask your new platform to start the transfer and give them the details of your old account. They take it from there.
There are two electronic transfer systems that platforms may use behind-the-scenes:
- TISA Exchange (TeX) – supporting cash and in-specie transfers of pensions, ISAs, and General Investing Accounts (GIAs).
- Origo Options – handling cash pension transfers only. An older system, but still widely used.
There are also a million ways of doing transfers manually, with letters, forms, wet signatures, faxes (yes, really) and emails. All of them bad.
With TeX and Options, no physical signatures are needed. Everything can be done online.
If a platform asks you to sign forms, then start worrying.
All the established platforms support TeX, but if you’re flirting with a small player or new entrant, check before committing. It’s nice knowing you can leave painlessly if things don’t work out.
What does a good platform transfer look like?
A few years back, I was involved in a research exercise. We opened an account with Fidelity and added a holding in a Vanguard Lifestrategy fund. Then we opened an account at Hargreaves Lansdown and requested an in-specie transfer of the Fidelity account.
Just a couple of hours later, we checked the Hargreaves account and the transfer had already completed. There was our Lifestrategy holding ready to be traded.
Admittedly, this was a simple transfer involving only well-established and highly automated organisations. But it shows what is possible.
There is no precise definition of how long a good transfer should take. The FCA regulations demand that transfers be carried out ‘within a reasonable time’, whatever that means.
More practically, industry initiatives have generally concluded that between one and two weeks is a reasonable target for a good transfer.
What’s the worst that can happen?
Some recent research [4] from Pension Bee found that 27 out of 163 advisers experienced pension transfers taking more than a year to complete.
Some reported waits of over 1000 days. That’s getting on for three years! I’d be on hunger strike in their head office before then.
My most recent workplace pension transfer took around two months to complete. Better than three years, but still desperately poor.
The problem? Basic communication. One party emailed the wrong address. The other waited for a reply that never came. Both sat waiting until I chased it all up.
Who knows, if I hadn’t chased maybe it would’ve taken three years…
What goes wrong?
Reasons for transfer delays are legion. Common problems include:
- Account detail mismatches – name or account number discrepancies
- Anti-scam checks – anything triggering red or amber scam warning flags
- Foreign holdings – non-UK shares and funds will often take longer
- AML/KYC issues – incomplete checks on the old account
- In-flight trades – transfers can’t proceed until settlement
But in many cases, problems are the result not of hard technical barriers like the above, but simple logistical hiccups. Think missed emails, misfiled instructions, or administrative overload.
Pension problems
When something goes very wrong, chances are it’s a pension transfer.
Pension transfers, for good reasons, are more tightly regulated. Unfortunately, some of the anti-scam regulations are clumsily drafted. This can cause unnecessary delays if applied with excessive zeal.
There are also some dark corners of the corporate pensions industry that still use quill pens and sealing wax, and with whom you’re always going to have a battle.
But for any reasonably modern personal pension with a competent administrator, there’s really no reason why a pension transfer should take any longer than an ISA or GIA.
A note on share classes
Share classes and conversions deserve an article of their own. (And one is in the pipeline. I can feel the thrill of excitement from here!)
For now I should at least highlight the platform transfer implications.
Say you own a fund on your existing platform, but your new platform only supports that fund in a different share class – perhaps one with discounted fees.
In this case, the holding will need to be converted as part of the transfer process.
The good news is that platforms are obliged to handle this for you so you can still transfer in-specie. It just might take a bit longer.
Are platform transfers getting easier?
At any given time there is at least one industry group aiming to solve the transfer problem. Trouble is, they often seem to resemble one of those public inquiries that deliberates and delays until everyone’s lost the will to live and the issue can safely be left to settle in the long grass.
Less cynically, there’s no doubt that transfers have improved considerably over the past decade or so.
But progress has been slow and has mostly been prompted by regulatory pressure. Don’t expect a step change anytime soon.
How to tip the odds in your favour
Some transfers will always be messy, but you can improve your chances of an easy life.
When choosing a new platform:
- Go electronic – make sure they support TeX
- Avoid exit fees – now very rare anyway
Before you initiate the transfer:
- Keep records – note holdings and balances
- Double check – account names and numbers
- Avoid March and April – tax-year-end congestion
During the transfer:
- Chase – early and often
The last one is crucial. If there’s the slightest problem then your transfer will likely get stuck in a queue until someone investigates. The loudest customer gets the attention.
So if you don’t hear anything for a couple of weeks, then chase it up. Chase both sides to be sure. Be polite and, most importantly, be persistent. Relentless even.
And finally…
Some transfers are quick. One day, maybe all transfers will be quick. But until that day, you’ll have to be vigilant, vocal, and dogged.
And please share your platform transfer tales in the comments. We can all learn from the experiences of others. And, of course, enjoy the horror stories!
Good luck – may your next transfer be closer to an hour than a year.